September 2, 2006

'Woolworths was officially notified by the DTI on Friday 1 September, of its intention to impose quotas on textile and clothing imports from China for a period of two years. Parties have been given 7 days to respond to this proposal, which has been constructed without consultation with retailers.
Woolworths is of the view that the implementation of this quota will have a further significant inflationary impact on the price of clothing which is already subject to a 40% tariff barrier.
Additionally, this quota will result in the loss of jobs within the South African retail industry – orders placed will be unable to be fulfilled in time or at anything close to imported prices, thereby depressing sales and consequent job opportunities in the retail sector. The consequent drop in revenue to the fiscus and confusion at the ports of entry cannot be in the country’s interest.
The South African clothing industry will also be affected by these quotas as they block the fabrics the local industry needs to provide the modern merchandise customers require.
Woolworths is concerned that replacing the blocked product locally will be a struggle. Much of the skills and technology are not available in South Africa, and, if they are, will come at significantly higher prices for customers.
Simon Susman, CEO of Woolworths commented, “‘We believe that had the dti been able to set aside due time to do a full impact study they would reconsider this ill-advised measure. The impact will be significant: customers will see higher prices – particularly in sensitive areas like children’s clothing which could go up by 20-25%; shelves will be empty over the holiday season; and ultimately there will be damage to South Africa’s textile industry, the industry to which these quotas are adding even further protection. It is a lose, lose situation.”
“In addition to the potential loss of jobs in retail, a thriving industry of South African workers who process, ship and transport legitimate imports from China will be laid off. These quotas do not in any way address the real issue of illegal imports from China,” said Susman.
Under the current proposal, the quotas will come into effect on 28th September 2006. Woolworths is concerned that, as orders are placed as much as nine months in advance, retailers in South Africa will be required to pay for product they cannot sell, and have reduced stock at the time of highest demand from customers – the holiday period.
Woolworths has always been a strong supporter of the local industry. 65% of Woolworths clothing for the next season will be produced in South Africa by local manufacturers who have worked closely with Woolworths to produce high quality product at competitive values using the latest technology. These producers too will be affected by both the fabric quota and the product quota. Local manufacturers increasingly use imports to balance their margins and, in further processing, to provide job continuity.
“We urge the dti to consult more widely with all stakeholders, particularly those closest to the consumer, before implementing this potentially inflationary and job eroding measure,” said Susman. “We will in the meantime be working with Clotrade, Texfed and our competitors to develop an action plan around this.”

Woolworths was officially notified by the DTI on Friday 1 September, of its intention to impose quotas on textile and clothing imports from China for a period of two years.